Shareholders of Inspire Medical Systems would probably like to forget the past six months even happened. The stock dropped 26.4% and now trades at $128. This might have investors contemplating their next move.
Given the weaker price action, is now an opportune time to buy INSP? Find out in our full research report, it’s free.
Why Are We Positive On INSP?
Offering an alternative for the millions who struggle with traditional CPAP machines, Inspire Medical Systems (NYSE: INSP) develops and sells an implantable neurostimulation device that treats obstructive sleep apnea by stimulating nerves to keep airways open during sleep.
1. Increasing Number of Domestic Medical Centers Leads to More Shots On Goal
Sales growth for companies like Inspire Medical Systems can be broken down into the number of facilities/providers and the revenue for each. While both are important, the latter is the lifeblood of a successful Medical Devices & Supplies - Specialty company because there’s a ceiling to how many facilities and providers one can secure.
Inspire Medical Systems’s number of domestic medical centers punched in at 1,495 in the latest quarter, and over the last two years, averaged 26.8% year-on-year growth. This pace was fast and gives the company more opportunities to increase its revenue. 
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Inspire Medical Systems’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.
3. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Inspire Medical Systems’s margin expanded by 48.2 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Inspire Medical Systems’s free cash flow margin for the trailing 12 months was 9.4%.
Final Judgment
These are just a few reasons why we're bullish on Inspire Medical Systems. After the recent drawdown, the stock trades at 46.6× forward P/E (or $128 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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